Hong Kong Tax Framework

SECTION A (21 marks) Answer ALL questions from this section. Question 1(21 marks) Mr Pang is the financial controller of AA Ltd, a company incorporated and carrying on business in Hong Kong. He is also a shareholder BB Ltd, which is also a Hong Kong company and is a wholly owned subsidiary of AA Lid. You have been supplied with the following information regarding the year of assessment 2015/16: (1) Annual Salary: $1,500,000 (2) Bonus: $300,000 (3) Dividend: $15,000 (4) Mr Pang took a 8-day business trip to London and Mrs Pang travelled with him. AA Ltd paid the following expenses in connection with the trip: Mr Pang Mrs Pang Flight by British Airways $12,000 $12,000 Hotel $22,000 No extra cost Meals $25,000 $25,000 Local tour in London Nil $3,000 (5) Mr Pang earned a gain on share options of $495,000. (6) Mr Pang rented a flat for his residence at a monthly rent of $22,000. His employer refunded $18,000 to him upon production of tenancy agreement and rental receipts. (7) At the annual dinner of AA Ltd on 30 September 2015, he won a cash coupon of $3,000 in the lucky draw. (8) Mr and Mrs Pang had paid the following expenses during the year: Mr Pang Mrs Pang $2,350 S 2,350 $15,000 $5,000 Membership subscriptions to HKICPA, a professional accountancy body in Hong Kong Cash donations to the Community Chest, an approved charitable institution in Hong Kong School fees for an accountancy degree programme at The Open University of Hong Kong Fees paid to a residential care home in Hong Kong for Mr Pang's father who is aged 70 $40,000 SO $60,000 SO (9) Mrs Pang is a housewife. The couple have a child aged 12. They are living with Mrs Pang's father and mother who are aged 65 and 58 respectively. REQUIRED: (a) Advise Mr Pang about the conditions under which an individual is entitled to a married person's allowance and if he is entitled to such an allowance. (5 marks) (b) Compute Mr Pang's salaries tax liability for the year of assessment 2015/2016. Ignore provisional salaries tax and tax rebates or reduction, if any. (11 marks) (e) Briefly explain the tax treatment of the following items under salaries tax: (1) Trip expenses paid by the company (item 4) (i) Cash coupon (item 7) (5 marks) SECTION A (21 marks) Answer ALL questions from this section. Question 1(21 marks) Mr Pang is the financial controller of AA Ltd, a company incorporated and carrying on business in Hong Kong. He is also a shareholder BB Ltd, which is also a Hong Kong company and is a wholly owned subsidiary of AA Lid. You have been supplied with the following information regarding the year of assessment 2015/16: (1) Annual Salary: $1,500,000 (2) Bonus: $300,000 (3) Dividend: $15,000 (4) Mr Pang took a 8-day business trip to London and Mrs Pang travelled with him. AA Ltd paid the following expenses in connection with the trip: Mr Pang Mrs Pang Flight by British Airways $12,000 $12,000 Hotel $22,000 No extra cost Meals $25,000 $25,000 Local tour in London Nil $3,000 (5) Mr Pang earned a gain on share options of $495,000. (6) Mr Pang rented a flat for his residence at a monthly rent of $22,000. His employer refunded $18,000 to him upon production of tenancy agreement and rental receipts. (7) At the annual dinner of AA Ltd on 30 September 2015, he won a cash coupon of $3,000 in the lucky draw. (8) Mr and Mrs Pang had paid the following expenses during the year: Mr Pang Mrs Pang $2,350 S 2,350 $15,000 $5,000 Membership subscriptions to HKICPA, a professional accountancy body in Hong Kong Cash donations to the Community Chest, an approved charitable institution in Hong Kong School fees for an accountancy degree programme at The Open University of Hong Kong Fees paid to a residential care home in Hong Kong for Mr Pang's father who is aged 70 $40,000 SO $60,000 SO (9) Mrs Pang is a housewife. The couple have a child aged 12. They are living with Mrs Pang's father and mother who are aged 65 and 58 respectively. REQUIRED: (a) Advise Mr Pang about the conditions under which an individual is entitled to a married person's allowance and if he is entitled to such an allowance. (5 marks) (b) Compute Mr Pang's salaries tax liability for the year of assessment 2015/2016. Ignore provisional salaries tax and tax rebates or reduction, if any. (11 marks) (e) Briefly explain the tax treatment of the following items under salaries tax: (1) Trip expenses paid by the company (item 4) (i) Cash coupon (item 7)